MA

4

-13-
constitute breach of contract; which purported contract or
contracts were allegedly breached; and which plaintiff is bringing
the claim. It goes (or should go) without saying that if Calderon
was not a party to a contract, he does not have standing to sue for
a breach of that contract.

4. Count V (Breach of the Covenant
of Good Faith and Fair Dealing)

In Count V, plaintiffs purport to allege a claim for breach of
the covenant of good faith and fair dealing. The duty of good
faith and fair dealing is a part of every express contract under
Illinois law, but it does not form the basis for an independent

tort. See, e.g., Coleman v. Madison Two Assocs., 718 N.E.2d 668,

674-75 (Ill. App. Ct. 1999) (“(N]otions of fair dealing and good
faith by themselves do not form the basis for tort relief.”);

Guardino v. Chrysler Corp., 691 N.E.2d 787, 793 (Ill. App. Ct.

1998); Anderson v. Burton Assocs., Ltd., 578 N.E.2d 199, 203 (Ill.

App. Ct. 1991).
Count V will be dismissed with prejudice.
5. Count VI_ (Franchise Disclosure Act
Count VI alleges that Cingular violated the Illinois Franchise
Disclosure Act (the “Act”), 815 ILCS 705/1 et seg. The Act applies
only to franchises; a franchise is defined as “a contract or
agreement . . . by which: (a) a franchisee is granted the right to
engage in the business of offering, selling, or distributing goods

or services, under a marketing plan... prescribed... bya



-4-
refuses to rent or sell certain cellular telephones to minority
dealers.

The amended complaint alleges the following claims: violation
of 42 U.S.C. § 1981 (Count I); violation of 42 U.S.C. § 1982 (Count
II); common-law fraud (Count III); breach of contract (Count IV);
breach of the covenant of good faith and fair dealing (Count V);
and violation of the Illinois Franchise Disclosure Act, 815 ILCS
705/1 et seg. (Count VI).

The original complaint was problematic because, among other
things, it was unclear as to who was the plaintiff--Calderon or
Airborne, or both. The amended complaint specifies that both
Calderon and Airborne are plaintiffs.

The original complaint also failed to specify which plaintiff
was asserting what claim. The amended complaint is improved, but
still employs the confusing plural term “plaintiffs” in each count.
Nonetheless, paragraph 1 of the amended complaint and plaintiffs’
response brief both state that Calderon asserts the federal claims
in Counts I and II, and that both Calderon and Airborne assert the
state-law claims in Counts III-VI. We also conclude that Calderon
was the agent of Airborne.

Defendants now move to dismiss the amended complaint.


7

fe

-9-

An introductory paragraph to Count III states that “[t]here
are seven incidents that constitute common law fraud and/or a
breach of contract.” (Verified Amended Complaint, 9 28.) However,
there are only six enumerated “incidents.” Moreover, although
paragraph 1 of the complaint states that the state-law claims are
brought by both plaintiffs, Count III switches between use of the
singular “plaintiff” and the plural “plaintiffs” and is confusingly
unspecific about which plaintiff relied on which statement in what
manner and to what detriment. If a statement was made to Calderon,
then plaintiffs should so allege; it does not make sense to allege
that a statement was made to “plaintiffs” given that one of the
plaintiffs is a corporation.

It is also noteworthy that plaintiffs appear to be attempting
at least in part to state a fraudulent inducement claim in Count
III, but they are very imprecise about when certain statements were
made in relation to what specific contracts were fraudulently
induced, and when those contracts were entered into. With respect
to some of the alleged statements, plaintiffs wholly fail to allege
when they were made. With respect to others, simply specifying a
year such as 1999 does not suffice because plaintiffs must allege
that the statement was made prior to entering into the relevant
contract that they claim was fraudulently induced. In addition to
failing to allege when the statements were made, plaintiffs fail to

allege where they were made. In some of alleged instances of fraud



-~6-

B. Cingular’ s Motion to Dismiss

1. Counts I and IT (42 U.S.C. §§ 1981 and 1982)

42 U.S.C. § 1981 provides that “[a]1ll persons within the
jurisdiction of the United States shall have the same right in
every State and Territory to make and enforce contracts... asis
enjoyed by white citizens.” 42 U.S.C. § 1981 (a). “(T]he term
‘make and enforce contracts’ includes the making, performance,
modification, and termination of contracts, and the enjoyment of
all benefits, privileges, terms, and conditions of the contractual
relationship.” 42 U.S.C. § 1981(b).

42 U.S.C. § 1982 states: “All citizens of the United States
shall have the same right, in every State and Territory, as is
enjoyed by white citizens thereof to inherit, purchase, lease,
sell, hold, and convey real and personal property.” 42 U.S.C. §
1982. Because they have a common origin and purpose, §§ 1981 and
1982 are usually construed together. See Morris v. Office Max,
Inc., 89 F.3d 411, 413 (7th Cir. 1996).

Cingular contends that Counts I and II fail to state claims
pursuant to Federal Rule of Civil Procedure 12 and fail to meet the
requirements of Federal Rule of Civil Procedure 8 because they do
not put Cingular on notice of the bases for the claims.

Calderon alleges that he is member of a racial minority and
that Cingular intended to discriminate against him on the basis of

his race. In Count I, he also alleges generally that the



-5-
DISCUSSION

A. SBC’s Motion to Dismiss

SBC contends that all claims should be dismissed as against
SBC because the amended complaint alleges no conduct by SBC for
which it could be liable to plaintiffs but merely alleges that SBC
is the parent company of Cingular.

There were only two parties to the Agreement: plaintiff
Airborne and defendant Cingular (actually, Cingular’s
predecessor).’ SBC was not a party to the Agreement. Plaintiffs
do not allege that SBC engaged in any conduct other than simply
being the parent company of Cingular, nor do they allege any facts
suggesting that SBC could be liable for Cingular’s acts (through,
for example, a veil-piercing or alter-ego theory). This is
insufficient to state any claims against SBC. “It is a general
principle of corporate law deeply ‘ingrained in our economic and
legal systems’ that a parent corporation (so-called because of
control through ownership of another corporation’s stock) is not
liable for the acts of its subsidiaries.” United States v.
Bestfoods, 524 U.S. 51, 61 (1998). Accordingly, defendant SBC will

be dismissed with prejudice.

4’ As noted in our earlier memorandum opinion, although plaintiffs did not

attach a copy of the Agreement to the amended complaint, we can consider that
document without converting defendants’ motions into motions for summary judgment
because the Agreement is referred to in the amended complaint and is central to
plaintiffs’ claims. See Venture Assocs. Corp. v. Zenith Data Sys. Corp., 987
F.2d 429, 431-32 (7th Cir, 1993).



MY

&

-~g-
alleging that there was a sales and service contract, but rather
that Cingular refused to enter into such a contract.

Count II will be dismissed without prejudice, and Calderon is
given leave to amend the complaint to specify exactly which conduct
forms the basis for the § 1982 claim. For both the § 1981 and §
1982 claims, plaintiff must describe the relevant alleged acts of
discrimination so that the court can discern whether acts were
directed against Calderon individually, as opposed to Airborne, the
corporation of which he is the majority shareholder.*® Counsel is
advised that if the revised pleading persists in such vague
generalities and imprecise references to other sections of the
complaint, Counts I and II will be dismissed with prejudice.

2. Count III (Common-Law Fraud)

To state a claim for fraud, plaintiffs must allege a false
statement of material fact; known or believed to be false by the
person making it; the speaker’s intent that the listener rely on
the misstatement; reliance on the alleged misstatement; and damage

resulting from the reliance. See W.W. Vincent & Co. v. First

Colony Life Ins. Co., 814 N.E.2d 960, 969 (Ill. App. Ct. 2004).

& The parties have not discussed, and we have not found very much case

law pertaining to, the issue of whether an individual has the right to complain
about discrimination directed at his corporate employer. A further question
would be whether a corporate entity has standing to assert a discrimination
claim. If it does not (which appears to be the general rule), then there is a
question regarding whether a corporate employee could assert such a claim on the
basis that he suffered detriment as a result of discriminatory acts committed
against his employer.


ri
9, Ming. Zager Form (06/97)

United States District Court, Northern District of Illinois

Name of Assigned Judge John F. Grady Sitting Judge if Other
or Magistrate Judge than Assigned Judge
CASE NUMBER 02 C 9134 DATE December 13, 2004
CASE Calderon, et al. v Southwestern Bell Mobile Systems
TITLE
[In the following box (a) indicate the party filing the motion, ¢.g., plaintiff, defendant, 3rd party plaintiff, and (b) state briefly the nature
MOTION: of the motion being presented.]
DOCKET ENTRY:
ad) Qa Filed motion of { use listing in “Motion” box above.]
(2) Oo Brief in support of motion due
(3) Qo Answer brief to motion due____—_. Reply to answer briefdue___.
@ oO Ruling/Hearingon___set for___at
(5) im Status hearing[held/continued to] [set for/re-set for]on__—setfor_—at_
(6) a Pretrial conference[held/continued to] [set for/re-set for]on__—s—s set for sat.
(7) Oo Trial[set for/re-set for]on__—sat__
(8) a (Bench/Jury trial] [Hearing] held/continuedto saat
(9) Oo This case is dismissed [with/without] prejudice and without costs[by/agreement/pursuant to]

COFRCP4(m) OGeneral Rule21 CFRCP41(a\(1) OO FRCP41(a)(2),

ao) [Other docket entry] Defendant SBC’s motion to dismiss37-4 is granted, and the amended complaint
is dismissed with prejudice as to SBC Communications Inc. Defendant Cingular Wireless’s motion to
dismiss, at is granted in part and denied in part. Counts I, Il, III, IV, and VI are dismissed without
prejudice, and Count V is dismissed with prejudice. Plaintiffs may file a second amended complaint by
January 10,2005, and are again advised that any amendment must comply with the pleading requirements
outlined in this opinion. ENTER MEMORANDUM OPINION.

aly x [For further detail see order (on reverse side offattached to) the original minute order.]
No notices required, advised in open court. Document
No notices required. sunberotvties ap Nlurmber :
X_ | Notices MAILED by judge’s staff. DEC 5
Notified counsel by telephone. \ 2084
Docketing to mail notices.
Mail AO 450 form. doe c - U L,
Copy to QD lores s°9
date mailed notice
KAM eputy’s Coy Ma Gt Sug hey KAM
initials

Date/time received in
central Clerk’s Office ‘mailing deputy initials

(Reserved for use by the Court)



-ll-
plaintiff must plead the who, what, when, where, and how of the
alleged fraud). We also repeat that promises of future conduct are
not actionable under Illinois law unless they are “particularly
egregious” or “embedded in a larger pattern of deceptions or
enticements that reasonably induces reliance and against which the

law ought to provide a remedy.” See Properties Unlimited, Inc.

Realtors v. Cendant Mobility Servs., No. 01 C 8375, 2002 WL
1147460, at *2 (N.D, Ill. May 28, 2002) (quoting Desnick v.

American Broad. Cos., 44 F.3d 1345, 1354 (7th Cir. 1995)). Again,

plaintiffs have not alleged these types of promises or a larger
pattern of deception.

3. Count IV (Breach of Contract)

In Count IV, plaintiffs allege the following:

40. Plaintiffs repeat paragraph [sic] 1 through 39 as
stated herein.

41. In 1997, Plaintiffs entered into a contract with
the defendants entitled Authorizes [sic] Dealer
Agreement, whereby the [sic] Cingular provided
cellular phones and Plaintiffs sold the phones and
receive [sic] profit and commissions.

42. Since April 2003, Defendants continued to breach of
[sic] Authorized Dealer Agreement by: failing to
pay commissions and residuals to Plaintiffs,
failing to extend credit and provide inventory to
Plaintiffs, and failing to provide regular reports
and financial statements.

43. The Plaintiffs and Defendants entered into a
contractual agreement with respect to the
statements made in the pleadings set forth in the
above common law fraud cause of action. Defendants
breached said contract by not fulfilling its [sic]
contractual obligations, as set forth above.

(Verified Amended Complaint, {9 40-43.)



-~ 10 -
(for example, the sixth incident), it is not clear why or how the
statement was fraudulent. Plaintiffs also fail to allege that
there was damage resulting from reliance on purported statements.

Moreover, plaintiffs imply in their response that they cannot
truly allege that the Cingular representatives who made the
allegedly false statements knew that those statements were false
when making them. Plaintiffs assert that whether the statements
were known to be false “is something that can be confirmed in
discovery,” and “if it is not shown that the individual who made
the false statement knew it to be false at the time he made it,
then the claim is only a breach of contract claim.” (Response at
7.) As with most of plaintiffs’ arguments, their position is
somewhat unclear. We will say, however, that it appears that
plaintiffs themselves have raised the question of whether there is
a factual basis for the fraud claim.

Accordingly, Count III will be dismissed without prejudice
Plaintiffs will be given leave to replead Count III. We remind
plaintiffs again that “[t]o meet the particularity requirements of
Rule 9(b), a complaint must specify the identity of the person
making the misrepresentation, the time, place, and content of the
misrepresentation, and the method by which the misrepresentation
was communicated to the plaintiff.” Sears v. Likens, 912 F.2d 889,

893 (7th Cir. 1990) (citation omitted); see also Katz v. Household

Int’l, Inc., 91 F.3d 1036, 1040 (7th Cir. 1996) (stating that the



-7-
discrimination “related to the making, performing and modifying a
contract, as set forth above and in the common law fraud cause of
action below.” (Verified Amended Complaint, @ 21.) It does appear
that many of Cingular’s alleged wrongful actions did indeed relate
to the making or performance of a contract. However, the language
“as set forth above and in the common law fraud cause of action

below” is much too vague to adequately put Cingular on notice of

exactly which actions, according to Calderon, constituted
discrimination. Therefore, Count I will be dismissed without
prejudice. Calderon is given leave to amend the complaint to

specify exactly, within the relevant count, which actions form the
basis for his § 1981 discrimination claim.

Calderon’s § 1982 claim alleges that Cingular discriminated
against him by refusing to rent or sell certain cellular telephones
to him. If Count II stopped there, it would adequately state a
claim. However, § 25, which is part of Count II, states that
“{t]he discrimination enumerated above concerns the selling and
renting of certain cellular phones under the ‘sale and services’
contract, as set forth above and in the common law fraud cause of
action below.” The phrase “as set forth above and in the common
law fraud cause of action below” sentence muddies the waters; it is
unclear whether Calderon is alleging additional conduct as a basis

of this claim. In addition, it does not appear that Calderon is



~3-
Agreement. For convenience, we will refer to the 1997 and 1999
Agreements collectively as the “Agreement.”

According to plaintiffs, in early 2002, Cingular stopped
paying commissions on activations for the preceding month and
continued to fail to pay Airborne commissions and residuals.
(Residuals, according to plaintiffs, are similar to royalty
payments, calculated on the basis of the monthly bill paid by a
customer.) Cingular also failed to promptly pay commissions for
sales of insurance coverage offered by Airborne as Cingular’s
agent. Furthermore, when customers who signed up for service
through Airborne have failed to pay their bills and have thus been
disconnected, Cingular has “charged back” the respective
commissions to Airborne. Cingular sometimes directly contracts
with the same customers again, but fails to reinstate the
commission and residuals.

Plaintiffs also complain about other aspects of their
relationship with Cingular and assert that Cingular’s alleged
actions stem from a “widespread pattern and practice of
discrimination against blacks and minorities.”? (Verified Amended
Complaint, 1 2.) According to plaintiffs, Cingular fails to uphold
its contractual obligations to minority dealers; refuses to enter

into “sales and service” contracts with minority dealers; and

¥ Calderon is Hispanic and alleges that he is a Mexican national.

(Verified Amended Complaint, @ 23.)



ws

Saw

-~14-
franchisor; and (b) the operation of the franchisee’s business
pursuant to such plan. . . is substantially associated with the
franchisor’s trademark . .. ; and (c) the person granted the right
to engage in such business is required to pay, directly, or
indirectly, a franchise fee of $500 or more.” 815 ILCS 705/3(1).
Cingular argues that plaintiffs have failed to allege the necessary
elements of a claim under the Act.

The Agreement specifically states that Cingular and Airborne
“acknowledge and agree that their agency relationship arising from
this Agreement does not constitute or create a general agency,
joint venture, partnership, employment relationship or franchise
between them.” (Cingular’s Memorandum, Ex. B, § 3 (emphasis
added).) The amended complaint alleges that “[p]laintiffs had to
pay SBC and Cingular Wireless $1000 for the right to engage in the
business of selling Cingular’s product and services. Plaintiffs
had to pay one dollar per customer, or phone that was activated,”
but the Agreement does not contain any such requirement. The
amended complaint does not allege that Airborne was a franchise,
nor does it allege that the $1000 payment constituted either a
direct or indirect franchise fee. Furthermore, plaintiffs’
response to defendants’ argument consists of a single conclusory
sentence stating that defendants violated the Act. Count VI of the
amended complaint therefore will be dismissed without prejudice.

It is obvious from the foregoing discussion what plaintiffs must


DATE:

ENTER:

-16-

December 13, 2004

City

John F. Grady, United States Dis Judge


at hye

communications services. Defendant SBC is Cingular’s parent
company.

The instant motions concern plaintiffs’ amended complaint. We
previously dismissed all of the claims alleged in the original
complaint, some with prejudice and some without, and gave
plaintiffs leave to file an amended complaint. Our prior
memorandum opinion contains a detailed description of plaintiffs’
factual allegations, which will not be repeated here. The
following summary will suffice for the present.

In 1997, Airborne entered into an “Authorized Dealer
Agreement” (the “1997 Agreement”) with Cingular’s predecessor, whom
we will refer to as Cingular. The 1997 Agreement provided that
Airborne would be a non-exclusive, authorized agent “to solicit and
contract” on behalf of Cingular with subscribers for wireless
cellular service, paging, and landline long distance service.
Pursuant to the 1997 Agreement, Airborne would be paid commissions
based on total activations per month.” When the 1997 Agreement was
scheduled to terminate, the parties executed a new Authorized
Dealer Agreement (the “1999 Agreement”), which contained

substantially all the same terms and conditions as the 1997

2 pursuant to the Authorized Dealer Agreement dated September 9, 1999

(the “1999 Agreement”), which is attached to Cingular’s motion, an “activation”
consists of “{t]he act of initiating an Authorized Service in or to a
Subscriber’s [equipment, such as a cellular phone].” (Cingular's Memorandum, Ex.
B, § 1.)



Aa
02-9134.041-JCD December 13, 2004

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION DOCKETED
DEC 1 5 2094
GUSTAVO R. CALDERON, individually,
and AIRBORNE BEEPERS & VIDEO,
INC., an Illinois corporation,

Plaintiffs,

SOUTHWESTERN BELL MOBILE SYSTEMS,
LLC, d/b/a CINGULAR WIRELESS,

)
)
)
)
)
)
v. ) No. 02 C 9134
)
)
)
and SBC COMMUNICATIONS INC., )

)

)

Defendants.

MEMORANDUM OPINION
Before the court are defendants’ motions to dismiss the
amended complaint. For the following reasons, the motion of SBC
Communications Inc. is granted, and the motion of Cingular Wireless
is granted in part and denied in part.

BACKGROUND

Plaintiff Gustavo R. Calderon is the president and majority
shareholder of plaintiff Airborne Beepers & Video, Inc.
(“Airborne”). Plaintiffs bring this suit against defendants
Cingular Wireless (“Cingular”) and SBC Communications Inc.
(“SBC”) .* Plaintiffs’ claims relate to Airborne’s role as an

authorized dealer for Cingular, a provider of wireless

Y Plaintiffs’ oral motion to voluntarily dismiss defendant Bell South

Corporation was granted on May 5, 2004.


-~12 -

In paragraph 42 of Count IV, plaintiffs adequately identify
certain alleged breaches of contract--(1) the failure to pay
commissions and residuals; (2) the failure to extend credit and
provide inventory; and (3) the failure to provide regular reports
and financial statements. However, paragraph 43 is extremely
vague. As with plaintiffs’ federal-law claims, the last sentence
of the breach of contract claim muddies the waters. it is
confusing because it refers to “a contractual agreement with
respect to the statements made in the pleadings set forth in the
above common law fraud cause of action.” Are plaintiffs alleging
that each allegedly fraudulent statement also constituted breach of
contract? If so, how? And are the alleged breaches those of the
Agreement or of some other purported contract?

Count IV is also problematic because it is supposedly brought
by both Calderon and Airborne. As we explained in our earlier
opinion, Calderon cannot bring a breach of contract claim based on
the Agreement because he was not a party to the Agreement (only
Airborne was). If Caideron is claiming that he entered into some
other, separate contract with Cingular, he should specify the
contract and set forth the attendant circumstances.

Count IV will be dismissed without prejudice. Plaintiffs are
given leave to amend the complaint to specify exactly which alleged
actions (in addition to the three actions described supra) form the

basis for the breach of contract claim; how those actions



“4

- 15 -
add to a second amended complaint in order to state a Franchise Act
claim.

CONCLUSION

For the foregoing reasons, defendant SBC’s motion to dismiss
is granted, and the amended complaint is dismissed with prejudice
as to SBC Communications Inc.

Defendant Cingular Wireless’s motion is granted in part and
denied in part. Counts I, II, III, IV, and VI are dismissed
without prejudice, and Count V is dismissed with prejudice.

Plaintiffs may file a second amended complaint by January 10,
2005, and are again advised that any amendment must comply with the
pleading requirements outlined in this opinion. We advise
plaintiffs’ counsel to employ much greater care and precision in
drafting a second amended complaint. This court has already
devoted an inordinate amount of time to the pleadings in this case,
which in large part have been woefully deficient. If any counts of
the third amended complaint are similarly deficient, plaintiffs’
counsel is warned that those counts will be dismissed with
prejudice and/or could be subject to possible Rule 11

ramifications.